The present invention relates to a method and a system for electronically processing transactional data and monitoring funds invested in a plurality of annuities or life insurance investments such that the invested funds are protected by depositor's insurance, such as FDIC insurance.
Federally approved banking institutions, banks and savings and loans, pay premiums to the federal government such that money on deposit in those banking institutions is federally insured. If the banking institution becomes insolvent for any reason, the federal government pays the depositor for any losses up to an established insured limit. At present, deposits are insured up to $100,000.00. There is a regulation which provides that funds deposited by life insurance companies or a corporation solely to fund life insurance or annuity contracts will be insured up to the depositor's insurance limit ($100,000.00) per individual (annuitant) entitled to receive benefits under the contract. The persons entitled to receive benefits under an annuity contract are called herein "annuity beneficiaries" whether those persons are legally classified as annuitants or as beneficiaries. An annuity contract is a contract that pays an annuity beneficiary an amount at regular intervals or pays an annuity beneficiary a lump sum at a predetermined time in the future. The annuity contract is funded or provided for by a customer. Essentially, the customer pays a certain amount of money to a company, the company invests that money, and the company at a certain time in the future or at regular intervals pays the annuity beneficiary a prescribed amount as required under the annuity contract. Annuity beneficiaries are sometimes called "annuitants."
Some types of annuity contracts are deferred annuity contracts. Deferred annuity contracts allow funds to be accumulated on a tax deferred basis over the term of the contract and pay a lump sum or make periodic payments to annuitants at a certain time in the future. For example, a customer may fund a deferred annuity and, upon retirement of the customer, the company holding the annuity pays the customer either a lump sum or periodic payments as selected by the annuitant. In this example, the contract is annuitized upon retirement of the customer. If the contract is surrendered during early years, there are surrender penalties. If there are partial withdrawals, penalties sometimes apply. Interest if withdrawn is reportable as income in the year of withdrawal.
In order to obtain the benefit of the depositor's insurance, the corporation holding the annuity must establish an internal account for the annuity beneficiary and place the funds on deposit with a federally approved institution (FDIC institution) in the corporation's own name. However, the corporation can accumulate and combine investments for a number of annuity beneficiaries and invest that aggregate sum with a single banking institution. The regulations provide that, in the event the banking institution becomes insolvent, the federal agency providing the depositors' insurance will pay the company for losses sustained by a particular annuity beneficiary provided those losses do not exceed the established depositor's insurance limit value.
Tax deferred annuities are presently being marketed throughout the United States by life insurance companies. Tax law presently allows interest earnings in tax deferred annuity accounts to accumulate tax free until withdrawn. Consequently, this form of annuity has become a popular investment, particularly for those saving for their retirement years. However, funds invested in deferred annuities are not federally insured. There have been losses suffered by purchasers of annuities due to the inability of some insurance companies to remain solvent. This is particularly devastating for anyone depending on annuity income for support during retirement years. It would be a great benefit if the features of tax deferred annuities could be combined with federal deposit insurance.
Funds deposited in Federal Deposit Insurance Corporation (FDIC) banks solely to fund annuities or life insurance contracts are currently insured up to $100,000.00 for each annuitant. Present FDIC regulations permit this to be done. A system that enables life insurance and annuity companies to place annuity funds or life insurance funds so as to be covered by federal deposit insurance without exceeding those limitations and which continually monitors accounts for the same purpose, performs a valuable service for the customer.
Individuals that presently have funds in banks can maintain their deposits in different categories of legal ownership which makes it possible to have more than $100,000.00 insurance coverage in a single institution. This is true only if the funds are owned and deposited in different ownership categories. Individuals almost always monitor their deposits in savings institutions so as to maintain full insurance coverage at all times. However, if such individuals purchase a tax deferred annuity that is to be deposited in an insured institution, the responsibility to monitor such funds as to their insurability shifts to the insurance or annuity company. A problem immediately arises since a multi-state life insurance company collecting premiums from thousands of contract holders throughout the U.S. could inadvertently fund an annuitant's contract by depositing funds in an institution in which the annuitant already has a standard deposit, savings account or certificate of deposit. If the funds deposited by the insurance company and the already existing account in that same institution are maintained in the same category of legal ownership, FDIC regulations require that the insured limit must be applied to the combined total amount held within each category. This could result in funds being without insurance coverage. This would be a violation of the contract on the part of the insurance or annuity company that promised to place the funds so as to be federally insured. Given that a multiplicity of insurance companies would be depositing funds in a multiplicity of banks involving annuity accounts from thousands of customers, a system needs to be devised that would safeguard annuity purchasers from the risk of uninsured accounts, and which would enable insurance companies to meet their contractual obligations. Such a system must also periodically monitor accounts focusing on the impact of interest additions to all accounts and the impact thereof as it relates to insurance limits.